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Macron and Merkel Must Flex Muscles to Save Iran Nuclear Deal By Axel Hellman, Axel Hellman is a Policy Fellow at the European Leadership Network (ELN).

 

 

 

 

 

The fate of the international nuclear agreement with Iran, known as the Joint Comprehensive Plan of Action (JCPOA), looks increasingly uncertain in light of repeated attacks from U.S. President Donald Trump, who has threatened to walk out of the deal unless Congress and European counterparts agree to “fix it.” The recent appointments of Mike Pompeo and John Bolton—both vocal critics of the JCPOA and widely seen as staunch hawks on Iran—make it less likely that Trump will keep the United States in the deal at his next decision point by 12 May. Faced now with the likelihood of U.S. withdrawal, Europe must decide how far to go to try to preserve the agreement in the face of renewed U.S. sanctions.

Against this backdrop, the forthcoming visits to Washington by French President Emmanuel Macron and German Chancellor Angela Markel come at a time of great importance for the nuclear agreement, regional security, and transatlantic relations. Macron’s meeting with Trump will be of particular significance, given the good rapport between the two leaders. Syria will likely feature at the top of the agenda, but the visit will offer an urgent opportunity to remind President Trump of the importance of the nuclear deal for his European allies.

U.S. decision makers can still be influenced. Washington’s position on the nuclear deal is far from monolithic and it is still possible that President Trump could be influenced by congressional opinion, which remains sensitive to European concerns. There is no congressional majority for a unilateral U.S. withdrawal from the JCPOA while Iran remains compliant, still less for the re-imposing secondary nuclear-related sanctions on European allies. Even if the United States decides to leave, some main provisions of the deal might still be kept.

This leaves plenty of scope for European intervention. Representatives of the European signatories of the JCPOA, the so-called E3 (Germany, France, and the United Kingdom), are currently engaged in consultations with their U.S. counterparts to save the agreement. This includes discussions on how to accommodate President Trump’s concerns over the deal’s inspection provisions and “sunset clauses,” as well as over Iran’s missile programs and regional activities. But European leaders are also making clear that they will not just fall into line if Washington decides to leave the agreement and re-introduce sanctions.

A re-introduction of sanctions does not necessarily equate to a full re-introduction of all U.S. sanctions without exemptions. American policymakers can calibrate the sanctions they choose to re-instate and the executive powers of the president in matters of national security add to this flexibility. This means that there is plenty for Europeans to negotiate for with their U.S. counterparts about the terms of any U.S. withdrawal. It is possible to envision a transatlantic quid pro quo in which U.S. secondary sanctions are waived even if the United States leaves the agreement.

The risks of a U.S. withdrawal and a comprehensive snap back and enforcement of secondary are nonetheless tangible. As a result, European policymakers are considering credible ways to signal that the EU is willing to take action if confronted with this scenario. This includes reviving EU “blocking regulation” (which seeks to prohibit EU persons from complying with U.S. secondary sanctions or acknowledging the jurisdiction of non-EU courts or authorities with respect to those sanctions) and filing complaints at the World Trade Organization (WTO).

There are significant and inherent risks with these options. These retaliatory measures could easily escalate into an unpredictable and unmanageable tit-for-tat. This would not only impose significant costs on the EU and cause serious friction in the transatlantic relationship but also do damage to the institutions that uphold the free movement of goods, services, and ideas – bedrocks of the multilateralism the EU cherishes. After all, pushing back against the United States requires political will. And while there is undivided support for the JCPOA within the EU, there is little appetite for further confrontations with the United States.

Notably, this could change if Washington is seen as taking further steps to undermine transatlantic relations and European interests. An already fractured partnership is sensitive to further blows – for instance if the United States would go ahead and impose tariffs on European exports after the temporary exemptions on EU steel and aluminum exports expire on May 1.

The wider international context in May is therefore going to matter a great deal for the fate of the JCPOA. So too will the way that the Europeans choose to frame their differences with Washington over the deal. A choice between the JCPOA and good relations with Washington is one thing; the ability of the EU to maintain its security, its autonomy and the values it thinks should define the international order is quite another. The latter would merit a tougher stance.

Still, an inconvenient truth remains—no EU action can completely shield European businesses and investments in Iran. In this sense, there is no bulletproof defense of the JCPOA’s economic benefits in the event of a U.S. withdrawal. The EU and its member states can pursue measures to shield existing links, encourage further business activity and boost investors’ confidence in the Iranian market, but while government can facilitate business, it cannot control it.

Consider the lingering caution of financial institutions despite sanctions relaxation under the JCPOA, which is a sobering reminder of the challenge of steering the private sector through Iranian market obstacles. As the chief legal officer at HSBC noted in response to the Obama administration’s push to encourage European banking activity in Iran, “Governments can lift sanctions, but the private sector is still responsible for managing its own risk and no doubt will be held accountable if it falls short.” In light of the current uncertainty surrounding President Trump’s policy towards Iran, private sector actors will have plenty of reasons to be wary of the Iranian market. This will continue to restrict investment for the foreseeable future.

As a result of struggles with financing, major businesses are canceling or scaling back their planned activities in Iran. Airbus is struggling to complete its sales of Aircraft to Iran; Total, the French energy giant, is deep into contingency planning for its Iranian operations; and Bouguyes, a French industrial group, has decided to put their Iranian plans on the shelf. As noted in a recent Bourse & Bazaar study, this risks dragging the JCPOA into a “zombie state.”

Europe nevertheless has realistic options in the face of a U.S. withdrawal. There is a strong commercial interest in engaging with Iran, and European policymakers can promote policies that help turn interest into action. They need not—indeed, should not—put all their eggs in one basket but should pursue an array of options in parallel. This includes solidifying international support for the JCPOA, demonstrating that re-imposing sanctions unilaterally will come at a cost for the United States, seeking U.S. exemptions for European businesses to continue operating in Iran, and bolstering international business confidence in the Iranian market. Such practical steps, taken now, can bolster European negotiating leverage with Washington, send useful signals to Tehran and strengthen European political will to defend the JCPOA.

 

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